One of the most frustrating aspects of manufacturing is the time and money spent to develop a new product. It is out there in the market and the company has one of the biggest one-day percentage gains during the current trading session. It is one of the biggest stock gainers. Engineering, marketing, and other divisions have worked together to bring this product to fruition and boom! The company is hit by a regulatory agency for non-compliance of a rule, law, or statute that wasn’t even considered during the product development cycle.
This unfortunate mishap has brought down many companies because of the cost of becoming compliant or proving compliance may well exceed the cost of the product development. Today companies are taking a proactive stance regarding regulatory compliance. There are four major factors that have increased the risks of non-compliance for business today.
1. Outsourcing and Supply Chain Are Increasing Compliance Risks
In the past, companies were only responsible for irregularities that could be tied directly back to them. More and more companies are being held for violations by third-party suppliers (third party), partners, and sales agents.
2. Prosecutions Don’t Stop at the Border Anymore
Nations and countries around the world are beginning to follow non-compliance issues through a product’s delivery to its destination. However, a company in Country A, violates a law in Country B, and the product is shipped to Country C. Today all three jurisdictions may pursue the company as opposed to just the country where the violation occurred. The three countries may share details of their investigations and go after the company with three times the law enforcement power.
3. Privacy Regimes Are Creating Double the Complexity
The latest privacy laws that have been passed around the world have had a two-pronged effect on compliance. The first is an issue of complying with the privacy laws in each country as it is and secondly, compliance has to be observed during investigations as privacy laws are very much in play as to what can actually be seen or looked or asked about only by following the appropriate regulations. This makes these investigations of non-compliance more difficult and more expensive both monetarily and as well as the company’s reputation.
4. Social Media is Unforgiving
Social media is an immediate publication and broadcast of any and all posts that are listed on the media. An employee posts about a questionable action, it will become spread throughout the media, whether it is true or not. A competitor comments on a rumor or a journalist lists a comment picked up at a meeting. Once any of these sources make a posting on social media, it is first taken as the gospel truth, and, second, is spread throughout and becomes virtual. No one reads the post that says the company has cleared every regulatory hurdle. That’s what is supposed to happen and it is not really news. However, any stumble or appearance of non-compliance, whether true or not, will spread like wildfire throughout the social media platforms.
The Importance of Compliance
Today’s business environment has so many rules, regulations, and laws that it is impossible to know all of them and to make sure the company is not running astray of any of them.
To keep track of all of these and to verify the company is meeting all of them requires two things. The first is a compliance department headed by a chief compliance officer (COO). This department will follow and document all compliance guidelines, issues, cases, and projects. Secondly, the company will have a compliance kit. These kits are made up of elaborate software packages as well as databases that keep track of all information and will help in audit court cases, compliance risk management factors, performance management and a host of other factors.
Quality of product and verification of that quality was the emphasis of business in the 80s and 90s. Today, it is compliance with regulations, rules, and laws that are keeping company chief executives awake at night. The time and money put into developing new products or services will be lost if the compliance to these regulatory rules is not kept. Unfortunately, it doesn’t take much to be non-compliant, but companies cannot afford to be non-compliant and are spending the time and manpower to make sure everything that it is done meets the regulatory requirements.